In a notice published on March 21, the monetary authority declared that the investment venture had been run as a pyramid scheme, which is prohibited under Sri Lanka’s Banking Act.
“We conducted investigations for several months,” M D S N Gunatilleka, the additional director of the CBSL’s resolution and enforcement department told Al Jazeera. He declined to give further details immediately.
The CBSL said it has sought the advice of the attorney general – the chief legal adviser to the government – on pressing criminal charges against those responsible.
Under Sri Lankan law, running pyramid schemes can result in imprisonment between three to five years. Offenders also have to pay a fine of 2 million Sri Lankan rupees ($6,222) or twice the amount received from the participants in the scheme, whichever is higher.
In August 2022, Al Jazeera revealed that as the economy around them cratered, thousands of Sri Lankans, including professionals like doctors, politicians and security personnel, fell prey to the fake crypto scheme.
Some gave up their jobs in the hope of high returns while many pawned their jewellery, mortgaged their property and sold their vehicles to invest all they could in the cryptocurrency introduced to them as Sports Chain. Despite being promised a five-time higher return, they had barely received what they had invested and many did not even get that.
What they did not know at the time was that the cryptocurrency named Sports Chain never existed in the virtual currency market.
Sri Lanka’s Financial Crimes Investigation Division (FCID) began investigations less than a month after Al Jazeera’s revelations and has since charged nine suspects for money laundering.
If found guilty under the Money Laundering Act, the suspects will be liable to pay the state a fine of up to three times the value of the defrauded property. They can also face between five and 20 years of jail time.
But for the investors to retrieve their money, Sri Lanka’s central bank will have to charge the suspects under the Banking Act for running a pyramid scheme.
Lawyers appearing for the accused maintain their clients cannot be charged for money laundering.
“Our clients were not the creators of this app. They had no control over it,” lawyer Tivanka Ekaratne, appearing for the accused, said.
“This has not been proven as a pyramid scheme yet. It is the investors who have made such claims,” Ekaratne said responding to Al Jazeera on the CBSL’s decision to prohibit Sports Chain.
During hearings at the Colombo Chief Magistrate’s Court late last month, attended by Al Jazeera, the FCID said it was continuing investigations into the suspects.
“They had swindled more than 15 billion Sri Lankan rupees ($46.6m) from more than 8,000 Sri Lankans,” the FCID said in a petition filed with the Colombo Chief Magistrate’s Court.
The suspects – Shamal Bandara, Zhang Kai, Wang Yixiao, Shanaka Madushan, Viraj Madushanka, Amith Wickramage, Rovinda Manjula and Pradeep Kumara – had been remanded and granted bail in December. Isuru Lakshika, the ninth suspect, had been granted bail in March.
While their bank accounts have been frozen, the FCID is also seizing assets such as vehicles and houses acquired by them suspiciously. The suspects have been barred from leaving the country.
Where is the money?
In court filings, seen by Al Jazeera, the FCID has made damning revelations on how the suspects invested some of the money they received from their victims in expensive vehicles and two to four-bedroomed luxury condos at a housing complex in the capital Colombo.
Shamal Bandara, who has been named as the main suspect in the case, had told investigators his only assets were a house in the northwestern town of Kurunegala and an old vehicle. However, the FCID found that Bandara had been using a jeep bought under his mother’s name.
He had also paid 5 million Sri Lankan rupees ($15,556) and 20 million Sri Lankan rupees ($62,226) separately to buy two housing units at the luxury Destiny Mall & Residency complex, which was built on a 4,046 square metre (1 acre) property in Colombo last year, according to a report filed by the FCID with the court.
A Mercedes-Benz vehicle bought under the name of Bandara’s brother had been used by Zhang Kai and Wang Yixiao – the two Chinese nationals who are also suspects in the case.
Court documents show that it was Bandara and Kai who had led efforts to promote this investment scheme by organising events, sometimes at luxury hotels. Kai had been introduced to the investors as the Global Founder of Sports Chain ZS Society.
Other suspects like Shanaka Madushan had bought three units in the same apartment complex as Bandara, while Rovinda Manjula and Pradeep Kumar had bought one each. Manjula had also constructed a luxury two-storied house in Kurunegala for 27.5 million Sri Lankan rupees ($85,561).
At the time of Bandara’s arrest, law enforcement officers had confiscated the staff IDs of all suspects who showed those to claim they were employees of a company called Bionics Healthcare. However, it had come to light that the company was fake and the company address on the IDs was misleading.
“The suspects had tried to link themselves to a fake company to create an impression that they had amassed these assets through legal means,” FCID said in a report filed with the court.
Escape attempt
When Shamal Bandara had been under interrogation after his arrest on October 11, 2022, police officers handed him his mobile phone to explain how his team had used a mobile app to run the investment scheme.
According to court documents, Bandara had used this as an opportunity to sneak in a WhatsApp message to an unidentified recipient. The message read: “Ask ZK to leave, you keep the key and leave as well”.
The FCID said it had identified the person referred to by the initials ZK, as Zhang Kai.
When investigators visited the rented house at which the two Chinese nationals were staying, other occupants with whom they had shared the place claimed the suspects were out visiting a five-star hotel.
However, shortly afterwards, Zhang Kai and Wang Yixiao were taken into custody at the Bandaranaike International Airport as they attempted to flee Sri Lanka.
‘Give us our money’
Investors say they are desperate to get back their money in the face of the economic crisis in Sri Lanka, which has seen inflation of about 54 percent in February 2023.
Last year, when Al Jazeera spoke to Harshana Pathirana, who had invested 2.2 million Sri Lankan Rupees ($6,844), he said he was looking to migrate to find a job and rebuild his finances.
“I am now working at a hotel in Qatar. I am using the money I earn to pay off my debt. I am not in a position to save anything yet,” Pathirana said seven months later.
The 38-year-old said he has been riddled in debt he took to make ends meet until he managed to find a new job.
He had sold his car to invest in the crypto venture and had even quit his job hoping he would become rich from his investment. “My family is still unaware that I invested the money in this scheme. I have kept it a secret,” he said.
Pathirana’s name has been changed to protect his identity as his family is unaware that he has lost his money.
Another investor, Priyanga Kasturiarachchi, 40, told Al Jazeera, that getting the money back would make a huge difference to his life given the economic constraints he is facing.
Kasturiarachchi had deposited almost his entire savings of 1.8 million Sri Lankan rupees ($5,600), that he earned as a tourist guide for more than a decade and had managed to withdraw 1.3 million rupees ($4,044), he said.
“Since we invested all we had at that time, we had to start from scratch to earn some money. If we manage to get it back, that would be very helpful to all of us,” he said. “We are exploring all possible legal options as we want them to give us our money”.
Kasturiarachchi said he and other investors are aware they would not be able to retrieve their lost money if the charges are just for money laundering.
“We will be happy if they are sent to jail. But it’s also important for us to get our money back,” he told Al Jazeera. “We will have to wait and see what happens when the CBSL files charges against them. At the end of the day, we need our money back”.
The Colombo Chief Magistrate’s court will take up the case filed by the FCID for hearing again in August.